Pfleiderer’s first half of 2009 revenue and earnings both down

Aug 25, 2009. /Lesprom Network/. With the presentation of its half-year figures, Pfleiderer AG has confirmed that it was unable to fulfill the financial covenants agreed upon with its creditor banks, Woodpanels Online reported. The company already indicated this possibility in the middle of June. The first half of 2009 was significantly affected by the recession both on the revenue side and on the earnings side. Unit sales and prices achieved were both lower than in the first half of last year. Revenue fell by 24.5% compared with the prior-year period to €692.4 million. The effects of currency translation reduced revenue by €38.9 million or 4%. In regional terms, the strongest drop in revenue was of 39.4% in Eastern Europe, while the Pfleiderer Group posted revenue growth of 0.5% in North America. The share of revenue generated outside Germany was 71.5%, compared with 71.9% in the first half of 2008. Despite the sharp drop in revenue, the Pfleiderer Group was able to increase its gross margin compared with the prior-year period from 25.7% to 26.2%, thanks to lower raw-material prices, efficiency improvements and consistent cost reductions. An additional factor affecting the gross margin was the release of provisions in an amount of €10.0 million. Lower business volumes led to significant under-utilisation of the plants’ capacities. This impact was dampened by reducing working hours to offset overtime on employees’ work accounts and by reducing the use of temporary workers, as well as by the flexible application of short-time work in various plants, depending on the order situation. As a result of the cost cutting actions, selling expenses decreased compared with the prior-year period by 16.0% to €100.4 million, and administrative costs were reduced by 9.4% compared with the prior-year period to €59.6 million. First-half EBITDA fell to €79.1 million, compared with €119.5 million in the prior-year period. The resulting EBITDA margin for the first half of this year was 11.4%. EBIT fell to 22.6 million euros, from €54.8 million in the first half of last year. Depreciation and amortisation totalled €56.5 million; this figure includes impairment charges of €4.0 million. “Our half-year results are a reflection of the global financial and economic crisis. We are adjusting to this situation with strict cost management as well as innovative product solutions. Our approach has been affirmed by numerous prizes and awards, but also by actual contracts concluded with renowned customers. With regard to the talks we are holding with our banks, we are confident that we will bring them to a successful conclusion in the coming months and will thus secure the Group’s long-term financing. This also includes talks with KfW,” stated Hans H. Overdiek, CEO of Pfleiderer AG, upon the announcement of the half-year figures. In Eastern Europe, the Pfleiderer Group’s revenue declined by 39.4% to €124.9 million . Exchange-rate effects accounted for €42.1 million or 21%age points of the decrease. The other factors responsible for the revenue decline were falling demand from the furniture industry due to the serious effects of the financial market crisis in this emerging region and the sharp fall in prices. Poland and Russia are affected by this development, whereby the situation in Russia is more difficult. During the reporting period, MDF was the least affected by the negative trend, but still resulted in falling revenue. In its North American sales markets, the Pfleiderer Group increased its revenue in the first half of the year by 0.5% compared with the prior year period to €211.5 million. This growth was primarily achieved in the flooring segment, in which Pergo further increased its share of a shrinking market. Total unit sales of panels declined, but at a lower rate than the market average. A little growth was achieved with MDF and HDF, but unit sales of raw particleboard decreased. In the fourth quarter of this year, the new MDF plant in Moncure, USA will go into operation on schedule, and will further improve the cost position in North America. Investment of €17.3 million in Eastern Europe includes the expenditure for the development of the MDF plant in Novgorod, Russia; no date can yet be set for when that plant will go into operation.